Ian Cowie was named Consumer Affairs Journalist of the Year in the
London Press Club Awards 2012. He has been head of personal finance at
Telegraph Media Group since 2008, having been personal finance editor
since 1989. He joined the paper in 1986. He is @iancowie on Twitter.

Divorce your bank for a zero per cent overdraft this Christmas

Bankers smugly say that people are more likely to get divorced than change their current account. Perhaps that explains why so many treat their customers badly, charging more than quadruple the rate of inflation for the average authorised overdraft, according to new figures from the Bank of England.

That means interest bills of 19.3 per cent compared to the Retail Prices Index (RPI) 4.5 per cent annual rate of increase. To add insult to injury, average interest paid by banks on current accounts in credit is just 0.19 per cent.

Fortunately, there are good deals to be found among more than 230 current accounts – and you don’t need to go to tiddlers or online operations with no high street presence to find value.

For example, Santander – which has more than 1,300 branches in Britain and is one of the biggest banks in the world – currently offers a 0 per cent overdraft rate for the first 12 months on transfers into its Preferred Overdraft Rate current account. The main requirement is that customers pay at least £1,000 a month into the account and pass its credit score but that should not be a problem for most people in regular work.

After the first year, Santander’s overdraft rate rises to 12.9 per cent. Those who need credit for longer could consider its current 0 per cent for 13 months offer on transfers into its credit card. Alternatively, the same bank pays 5 per cent on its Preferred In-Credit rate current account, with the same requirement that customers pay in at least £1,000 a month.

Across the high street, Halifax, Britain’s biggest mortgage provider, offers a completely different way of paying for short term credit. There is no interest rate on authorised overdrafts but, instead, a £1 a day fixed charge. This offers good value to people who occasionally go slip into the red briefly for substantial sums but is more expensive for frequent but small overdrafts.

By contrast, Lloyds Banking Group – which came to the rescue of Halifax when it was hit by the global credit crunch – charges its own Classic Current Account customers who go overdrawn an eye-watering 19.3 per cent.

To be fair, Mike Regnier, director of current accounts at Lloyds, said: “The majority of our customers do not use an overdraft. For those who do, we have reduced and simplified our charges and introduced a number of new measures to help customers avoid paying charges altogether.”

Which raises the important point that the best bank account for you will depend on how you use it. Zero per cent overdrafts – such as those mentioned above or HSBC subsidiary First Direct’s deal extending on debts up to £250 a month – are worth nothing if you never slip into the red.

Savers, who outnumber borrowers by six to one, want a real return on deposits; that is, interest that beats inflation. But the same rule applies to both types of customer. Don’t get mad with your bank, get another bank. It’s never been easier to switch.